Q.1: How are annual pay raises determined?A: : ECI is the Employment Cost Index, which is a measure of the increase in private-sector wages and salaries. It is calculated by the Department of Labor's Bureau of Labor Statistics and updated every three months. The ECI, reported each October, is used to determine the pay raise for the next fiscal year. The raise was set at ECI + 1/2% for 2000 through 2006. The FY2004 National Defense Authorization Act (NDAA) established that the military pay raise will be equal to ECI after 2006. Of course, Congress can enact raises that exceed these percentages as they did for 2008 and 2009.

Q.2: Does this affect Federal civilians?A: The provision for military pay increases set to the ECI does not necessarily pertain to Federal civilian employees. The pay tables for Federal civilians may be seen at the Office of Personnel Management web site.

A: No. Retiree Cost-of-Living Adjustments (COLAs) are based on the increase of inflation, which is measured by the Consumer Price Index (CPI), not ECI. Retirees receive an annual Cost-of-Living Adjustment (COLA).

A: Pay is still capped for some individuals by law to certain executive pay levels. The cap for basic pay for O-7 to O-10 is limited to Level II of the Executive Schedule. Basic pay for O-6 and below is limited to Level V of the Executive Schedule.